Call for bigger repo rate cut

NO EXPECTATIONS TO JUSTIFY NOT REDUCING FIGURE TO 7.5%, SAYS EXPERT

- Ina Opperman

» 'The consensus forecast was for inflation of 3.1%.'

Economists are calling for a 50 basis points repo rate cut after the news yesterday that the inflation rate decreased by a full one percentage point in October.

They say there are no inflation expectations to justify not cutting the repo rate by 50 basis points.

The SA Reserve Bank (Sarb) has the constitutional mandate to protect the value of the rand by keeping inflation low and steady and uses interest rates to influence the level of inflation.

To protect the value of the rand, Sarb currently uses inflation targeting to maintain consumer price inflation between 3% and 6%.

Prof Bonke Dumisa, an independent economic analyst, said the inflation rate drop to 2.8% in October, as announced by Statistics SA, was encouraging, especially compared to the impressive 3.8% in September.

"This emboldens me to say that the monetary policy committee (MPC) of Sarb must announce a 50 basis points repo rate cut from 8% to 7.5%.

"There are absolutely no inflation expectations to justify not cutting the repo rate by 50 basis points."

The MPC meeting is today.